Archive for the ‘Banks’ Category

Standard Chartered Said to See Exodus in Mideast Operations The high-profile departures at Standard Chartered include the global head of Islamic banking, the chief executive for the United Arab Emirates and the chief executive for Bahrain, Bloomberg News reports, citing people with knowledge of the matter.

Up to 20,000 people (8% of current work force) could be sacked at HSBC as the chief executive attempts to pacify investors by reducing costs to improve profits (see below): Us shareholders getting shirty.

Temasek, Aberdeen and other major shareholders should tell StanChart to cut its headcount. Although an ang moh bank, many of its senior and middle managers are “countrymen”, especially here in S’pore (Brits and Hongkies don’t love FTs that much). Ask presedential candidate Tan Jee Say and PAP FT MP Ms Foo: They had Indian FTs ahead, behind and beside them. Rumour has it that Indian FTs sacked both for non-performance, replacing them with less experienced and qualified “countrymen”.

The chief executive of HSBC, Stuart Gulliver, is expected to signal next week that thousands of jobs are to be cut when he outlines his latest strategy for the global banking business, according to reports.

After he took the helm in 2011, Gulliver outlined the need for 25,000 job cuts from a global workforce that then stood at 296,000. The annual report for 2014 puts the current number of employees at 266,000, or 257,600 full-time equivalents.

Another 10,000-20,000 cuts are reported to be on the cards as Gulliver attempts to pacify investors by reducing costs in an effort to bolster profitability. He is also expected to use the strategy day on 9 June to provide an update on plans to further retrench internationally, including from Brazil and Turkey.

Below is a summary of what Citi and UBS (Harry’s “forever” investments) pleaded guilty to from NYT’s Dealbook

HEAVY FINES FOR FOREIGN EXCHANGE COLLUSION At big banks, foreign exchange trading seemed like the ideal business – relatively low risk for solid revenues. But “what seemed like the perfect business turned out to be the perfect breeding ground for crime,” Michael Corkery and Ben Protess write in DealBook. Citigroup, JPMorgan Chase, Barclays and Royal Bank of Scotland pleaded guilty to a series of federal crimes over a scheme to manipulate the value of the world’s currencies, the Justice Department said Wednesday. A fifth bank, UBS, was also accused of foreign currency manipulation but was not criminally charged because it had alerted the Justice Department to possible misconduct. However, the accusations cost the bank an earlier nonprosecution agreement related to the manipulation of the London Interbank Offered Rate, or Libor.

Prosecutors said traders at the five banks colluded from at least 2007 to 2013. “To carry out the scheme, one trader would typically build a huge position in a currency, then unload it at a crucial moment, hoping to move prices. Traders at the other banks would play along, coordinating their actions in online chat rooms,” Mr. Corkery and Mr. Protess write. The foreign exchange business may have been particularly susceptible to manipulation because it can be less profitable than other forms of trading, which increases the pressure for the traders to look for alternative ways to pad their returns, analysts said. Also, no one government agency is responsible for policing the currency market, creating a regulatory void.

The five banks, which also struck civil settlements with the Federal Reserve, the Commodity Futures Trading Commission, a British regulator and New York’s financial regulator, agreed to pay $5.6 billion in penalties. That is in addition to the $4.25 billion that some of these banks agreed to pay in November to many regulators. Together, the amount nearly equalsthe foreign exchange revenue generated at 10 of the world’s largest banks last year, which was $11.6 billion, according to Coalition, a financial analytics provider.

WILL PENALTIES CHANGE BANKS’ BEHAVIOR? What’s notable in the currency manipulation case is the ethos articulated by the traders involved. They called themselves “the mafia” and “the cartel,” and one Barclays trader wrote in an online chat room, “If you aint cheating, you aint trying.” In the White Collar Watch column, Peter J. Henning asks whether the guilty pleas and penalties will make a difference in how banks do business, noting that “even as penalty after penalty is paid by big banks in various cases, it seems as though the same cast of corporate characters keeps reappearing.”

He notes that guilty pleas from the big banks are “noticeably tougher” than the enforcement actions of the past, when violations drew only deferred or nonprosecution agreements. Yet the act of pleading guilty doesn’t carry the same stigma as it did in the past, Mr. Henning writes, because the government has tried to keep a guilty plea from hindering a bank’s operations. The Justice Department has also been demanding the identities of the employees behind the violations, but it’s unclear whether it will actually prosecute those people. “To change corporate culture and prevent violations from happening in the future, prosecutors may have to go beyond just demanding cooperation and threatening ever larger fines,” Mr. Henning contends.

Shortly before Temasek sold, MM had said that S’pore Inc’s investments in Citi, UBS, and Merill Lynch had a time-frame of 30 yrs. Temasek held its ML investment for over a yr. GIC still owns shares in Citi (profitable), and UBS (big loss). https://atans1.wordpress.com/2011/01/17/mm-got-it-right-temasek-got-it-wrong/

UBS and Citi are still owned by GIC are now big time crooks. Recently, JP Morgan, Barclays, Citigroup and Royal Bank of Scotland – pleaded guilty to criminal charges in the US relating to the rigging of currency markets.

The four, and Switzerland’s UBS, which pleaded guilty to a different charge, agreed to pay $5.7bn (£3.6bn) in fines.

Last yr when Temasek gave a media presentation on its results, the question on StanChart elicited a BS reply but which when viewed today tells a lot about Temasek’s strategy in dealing with dogs with fleas: “Everything will be alright in the long term”. Err remember Keynes said in the long run, we are all dead.

QUESTION: Could you give us some comments on how do you see StanChart performing in your portfolio because over the last few years, especially in the last year and a half and looking at the outlook as well, they seem to be finding it quite challenging and there was a profit warning as well. What is your plan for StanChart? Do you think that… is that something that you would like to exit in the long term or you would treat StanChart as another Olam where you could actually try to take over?

RS: So look, it’s obviously not fair for us to comment on individual companies but all I would say is that yes, a lot of our stocks go through volatility. Standard Chartered is an emerging markets bank and like all emerging markets banks, the stock over the last year has been quite volatile. We, however, see ourselves as long term investors, short term volatility doesn’t concern us. We look at our investments over a longer term and use our value test to decide whether what we do with those stocks and we remain as an active investor always engaged with the companies.

Chinese policymakers have ordered banks to keep lending to local government projects under construction, in a sign of concern that a crackdown on shadow financing has reduced municipalities’ spending and is hurting the economy.

Financial institutions which signed legally binding contracts before the end of 2014 to loan to money to construction projects backed by local government financing vehicles (LGFVs) must not stop lending or reduce the loan size, a document posted on the State Council website Friday said.

“It is necessary to support the financing needs of LGFV projects under construction and ensure an orderly continuation,” the regulators said in the document.

“This will help meet reasonable funding demand of the real economy, as well as effectively prevent and resolve fiscal and financial risk.”

This is what his pal, Henry Kissinger (US Secretary of State, National Security Adviser) said in tribute to LKY: “His theme was the indispensable U.S. contribution to the defense and growth of a peaceful world.”

Doesn’t the Kissinger comment sound like a pat on the head for the US’s pet? Remember, even a “weak” president like Obama believes that the US is the world’s “indispensable power”.

And even LKY’s own words show that he can sound like a cheer leader for the US: that the US really won the Vietnam war. The Economist recently wrote:

After the [Vietnam] war, the region boomed. American intervention in Vietnam no longer looked such an unmitigated disaster. Lee Kuan Yew portrayed it almost as a triumph: without it, South-East Asia would probably have fallen to the communists. America bought the region time and, by 1975, its countries were “in better shape” to stand up to them. The prosperous emerging-market economies they have become “were nurtured during the Vietnam war years”.

No wonder the US delegation was led by an ex-US president while China sent an unranked politburo member, showing how important LKY was to China and the respect it accorded him

If you want to see how China treats ‘lau peng youu”, think about this.

This reminded me that many years ago I read “Wayfoong” (The Chinese name for Hongkong Bank and the title of a book on HSBC’s 100 yrs of existence: this yr it’s 150). A fair chunk of the book (which interesting I borrowed from a public library in Sydney) was devoted on how it was a good friend of China in the late 19th century and early 20th century: it raised foreign loans for building the railway system and stabilising the currency. I tot, “What a lot of bull. Hongkong Bank was an exploiter of China and the Chinese. It was founded to finance the opium trade.

Well we know that the CCP has a long memory and an even longer grievance lis: witness Japan.

At least to me now the book is more believable than what the PAP and LKY said about his ties with the Chinese leaders.

They make rich S’porean clients poorer, taking from the rich to give to their even richer employers? They are really the “Princes of Thieves”, better than “Robin Hood “Prince of Thieves”.

Remember these bond deals pay good commissions to the private banks (and their private bankers): they get fees from their clients (for giving them access to these now toxic products), and the issuing companies (for stuffing their mullets with junk).

Remember DBS’ Indian FT blowing up its Treasured clients with credit notes? This could be alot worse for the private clients.

Singapore’s richest investors are hoping that “never” means about three years in the bond market.

Holders of perpetual notes with no set maturity face the island’s first redemption options in September, when three companies including oil services firms Ezra Holdings Ltd. and Swiber Holdings Ltd. can choose to repay securities sold in 2012. While Ezra says it plans to pay off the notes and refinance, their yield has surged more than 200 basis points over the last year to 14.2 percent, suggesting it may be costlier to replace them. Swiber faces the same test after saying it plans to redeem its bonds, which have added more than 230 basis points.

Private banks have snapped up the bulk of Singapore’s S$9.5 billion ($7.1 billion) of corporate perpetuals on behalf of wealthy clients, reckoning the companies would repay the notes at their soonest chance rather than incur higher interest rates when a so-called step-up coupon takes effect. While that would offer some compensation if the debt stays alive, any mishaps could shake faith in securities that have funded about 15 percent of the island’s corporate debt over the last four years.

If any issuers choose not to pay in September, “there would be some discomfort among investors when they realize that what they’ve been holding is not necessarily going to be paid off at the time they expected,” said Vishal Goenka, the Singapore-based head of local currency credit trading at Deutsche Bank AG. “There is nothing right or wrong, issuers have already told them from the beginning the option was there, but there would be some confusion.”

Demand for higher returns in Singapore bonds from the city’s swelling private banking industry has brought with it greater risks.

Three out of every 10 notes sold last year are yielding more than 6 percent. Halcyon Agri Corp. went to debtholders last month asking them to waive interest cover requirements before it’s even had to stump up a coupon payment. Bloomberg’s default model shows that VTB Capital SA has an almost 50 percent chance of reneging on its debt.

“The recent swings have been a good wake-up call,” said Vishal Goenka, the Singapore-based head of local currency trading in Asia for Deutsche Bank AG. “Investors need to analyze the credit quality of issuers more thoroughly.”

The big concentration on financials is to play the rising Asian middle class theme. A lot of the exposure goes into China banks (not looking good going forward) and StanChart.

Err should have juz bot Apple leh? Look at its price since 2005 when Jobs returned https://sg.finance.yahoo.com/q/bc?s=AAPL&t=my&l=on&z=l&q=l&c= Ho Ching became CEO of Temasek in 2004, and Temasek started buying StanChart in 2006. She should have bot Apple.

Here’s why based on her thinking of riding the expansion of the Asian middle class (Not Italic bits below are my tots, snide comments).

What do two big American and European multinational corporations have in common? Not much on the surface when comparing consumer giant Apple to the FTSE-listed Standard Chartered bank.

However, both have been significantly affected by emerging markets in their first-quarter earnings. And how they’ve been affected is revealing of the way emerging economies have matured, particularly in Asia.

The emerging markets-focused bank, Standard Chartered, reported a big fall in pre-tax profits of more than one-fifth in the first quarter (22% to $1.47bn) as revenues fell by 4% and costs rose by 1%.

By contrast, Apple had a strong quarter where revenues rose by 27% to $58bn, driven by a 40% increase in sales of iPhones. More than 61 million were sold globally, and notably, the biggest market was China for the first time and no longer the US. [Demand from China’s middle classes, iPhone sales leapt 40% to 61.2m units.]

But iPad sales fell sharply by 29%, reflecting a weak spot in their figures. [Apple fixing this introducing new model for Jap aging market. If works in Jap, another big global winner.]

So, it’s a really tale of two emerging markets. [Ho, Ho, Ho]

One side of emerging economies is a concern over their slowdown in growth, which raises risks over loan repayments, not just in Asia but also commodity exporters in Africa and the Middle East.

These are Standard Chartered’s key markets. Indeed, Standard Chartered took a $476m charge on bad loans, which is 80% higher than the first quarter of last year, although loan impairments were lower than in the previous six months.

[Ho, Ho, Ho]

However, there’s also the consumer side of emerging markets to consider.

For Apple, China’s rapidly growing middle class generated an impressive 72% increase in sales of iPhones. And Greater China has even overtaken Europe to become Apple’s second largest market for the first time with revenues rising by 71% in that region to $16.8bn, which accounts for much of Apple’s strong performance. Net profit was a third higher at $13.6bn for the quarter.

So, as emerging markets, particularly in Asia, become middle income countries, companies that sell to those emerging consumers are well-positioned to benefit.

But the period of rapid economic growth, particularly via debt-heavy investment, of key emerging markets is seemingly over. And companies, particularly banks, are liable to struggle as those economies restructure toward being increasingly driven by consumption.

[Ho Ho Ho: so waz Temasek doing to get into the consumption plays? Olam? Asians eating more peanuts?]

My serious point that by focusing so much on financial services (30% of portfolio and not on consumer plays (outside of the Telecoms, Media & Technology sector: 24%), Temasek has for the last few years been betting on a three-legged horse. Other consumer plays are only a subset of Life Sciences, Consumer & Real Estate: 14%)

Temasek has stakes in three of the five major Chinese banks. See details here http://temasekreview.com.sg/en/major-investments/financial-services.html

An FT working for Reuters recently wrote

The biggest five banks reported a miserable sub-2 percent increase in earnings for the quarter, year on year. Two rate cuts have pressured their lending rates, and fees from other lines of business have slowed. A bigger drag is borrowers who can’t or won’t pay up. While bad debt levels are still low, charges for credit that hasn’t yet gone bad but might are leaping. These items increased by 73 percent year on year at China Minsheng Bank, and more than 50 percent at Agricultural Bank and Industrial Bank of China.

The valuations of big banks like ICBC, China Construction Bank and Bank of China are also burdened by the lenders’ role in big government schemes that are still not properly sketched out. Take the plan to reform local government finances by swapping some of the estimated 16 trillion yuan ($2.6 trillion) borrowed by regional authorities into new bonds. The new securities could leave banks holding the same credit risk in a different form, at deceptively low rates of interest.

China’s ambitions for global greatness also raises questions. Plans to roll out infrastructure under the clunkily named “one belt, one road” strategy are likely to involve hefty lending commitments. That may bring glory, but also pressure on banks to lend to projects that may take years to generate cash flows. In the meantime, if growth slows more at home, further rate cuts will add pressure to lenders’ margins.

Below is a Q&A from reported on Temasek’s website. It was asked, last yr, at a media conference on Temasek’s 2014 Review

QUESTION: Can you confirm if the Chinese banks are the major drag on your relative underperformance last year and then what are your views and plans for them? Thanks.

WYB: The banking stock has been volatile. I would not say the Chinese banks are the major drag on our performance. They do fluctuate from time to time. Chinese economy – we remain very optimistic over the long term. The financial institutions we believe have ample capability to weather the current storm and be able to adjust to the risks they’re facing. So, we remain comfortable with our stakes and we will continue to invest in the financial institutions because they are good proxy for the long term growth for Chinese economy.

RS: If I could just add to that, as you would have seen in our presentation, we had mentioned that about half our portfolio consists of listed stocks in Singapore and stocks that are listed on the H-share in Hong Kong and you saw even the Straits Times Index over the last year had negative returns, so it was not any one set of stocks, it’s just that some of the areas that we had invested in had weak market performance. And again, you know, these are results as of a particular date, March 31st. You mentioned the Chinese banks. Since March 31st, they rebounded by 10 to 12% or even if you look at the Straits Times Index, that’s up about 4%. So, you know, we really look at long term returns and look at investments over the long term horizon and are fairly comfortable with short term market volatility.

Citi and Merrill Lynch used to be known as the the banks that always joined a party when it was just about to go wrong. The sub-prime crisis proved the point.

Well Merrill Lynch no longer exists but Citi survived, just. Now it’s big in derivatives, very big and GIC still has a stake in it (It’s one of LKY’s forever investments). Let’s hope it’s not curtains Citi when derivatives tank.)

CITIGROUP’S RESURGENCE Seven years after Citigroup teetered on the brink, the bank’s traders and investment bankers have come roaring back,Peter Eavis writes in DealBook. The bank’s resurgence on Wall Street, which has involved acquiring huge amounts of derivatives, comes as many of its rivals pull back in the face of new regulations intended to make the financial system safer. But even as the bank has surged ahead, it has not trumpeted its comeback. Instead, its most senior executives have largely emphasized streamlining operations that have little to do with Wall Street, like agreeing to sell a unit that focuses on subprime loans.

Citigroup’s investment bank is no longer involved in the toxic activities that were most dangerous to the bank’s health, Mr. Eavis writes. The bank also has higher levels of capital, the financial buffer that reflects a bank’s ability to absorb losses. Such steps have helped it slowly regain favor with regulators. “Still, figures for Citigroup’s Wall Street operations show a bank that is on something of a tear,” Mr. Eavis adds. The unit that encompasses the firm’s investment bank, for instance, had $1.06 trillion of assets at the end of last year, a 12 percent increase from the level in 2010.

“Perhaps most astonishing is Citigroup’s meteoric growth in derivatives, the financial contracts that allow banks and investors to place bets without actually owning an underlying stock, bond or currency,” even as new rules have persuaded many banks to cut back on the amount of derivatives they hold,” Mr. Eavis writes. Citigroup has flexed its muscles behind the scenes to protect its derivatives business from certain new rules. But the growth of Citigroup’s investment bank and its derivatives business has raised concerns among financial specialists who support tougher regulations.

Bidders Seen for Stake in Postal Savings Bank of China UBS, BNP Paribas and Temasek of Singapore are said to be among the preliminary bidders seeking to buy 10 percent of Postal Savings Bank of China ahead of an expected initial public offering next year that could raise $25 billion.

As readers will know Ho Ching has big markers on StanChart and Chinese banks.

Once regarded as a proxy for the growth of Asian markets in commodity-rich nations like Indonesia, StanChart has today become a victim of the reversal of fortune suffered by many emerging markets and their heavily indebted corporate borrowers …

Much of the lending to Asia outside of China assumed the region would grow on the back of insatiable demand from China. Much of the lending to China itself was based on that same expectation. That faulty thinking was then compounded by assuming that the value of the Chinese property used to back the loans would also continue to rise. But local banks in China, such as Agricultural Bank of China, are beginning to report that their bad loans have doubled — although officially they remain under 3 per cent. (Excerpt from recent FT article)

Ho Ho HO.

But it’s our problem too now that Tharman is now using projected long term returns from Temasek to spend our money on ourselves. Cybernuts might want to note that their heloo, Ong Teng Cheong, wanted to lock-up all the returns from the reserves (more LKY and Dr Goh). It was Ah Loong that fought him. Ah loong is the real people’s hero. if Ong had his way, we’d be pressing our noses on the iron bars guarding our reserves: Money, money everywhere/ Not a cent to spend/ Give thanks to Ong Teng Cheong

But the pix’s not that great for our local banks either: what with DBS’s exposure to Greater China and Indonesia, OCBC’s exposure to Greater China, and UOB’s and OCBC’s exposure to M’sia. Btw, OCBC has FTs as its Chairman and CEO, while DBS and UOB have true blue S’porans (Yes, I’m counting Gupta as a local. He’s a real talent.)

Following the coming change in CEOs, the resignation of a very senior manager and a planned change of chairman, Viswanathan Shankar (new citizen and a real talent like DBS’s Gupta), head of the bank’s Europe, Middle East, Africa and Americas business, is said to be planning to start a private equity fund. The bank it seems wanted to give him additional responsibilities. This not not good as the deputy CEO (passed over for the job) is also expected to leave.

Temasek and other major shareholders wanted change. May be they’ll end up with serious instability.

No not LKY but Tidjane Thiam who FT reports got a 36% pay rise to £11.8m in his previous job at Prudential.

Thiam was born in Ivory Coast in 1962. His mother was the niece of Ivory Coast’s first president, while his uncle on his father side is Habib Thiam, who was president of Senegal for 10 years.

Thiam himself worked in the Ivorian government from 1994 to 1999, working as the head of the National Bureau of the Technical Studies and Development and a personal economic adviser to Ivorian president Henri Bédié.

RISK EXPERT TO LEAD CREDIT SUISSE Shareholders responded positively on Tuesday after Credit Suisse announced that Tidjane Thiam, the chief executive of the British insurer Prudential, would succeed Brady W. Dougan as chief executive, Jenny Anderson reports in DealBook. Shares of Prudential slumped 2.6 percent, while shares of Credit Suisse closed up 6.7 percent. The positive reaction reflects the rise of Mr. Thiam’s reputation in London financial circles and expectations that he will change the course of the Swiss bank, which in recent years has had large legal expenses, largely as a result of its role in helping Americans evade taxes.

Mr. Thiam, an African francophone, has never worked for an investment bank, though he has completed stints at McKinsey, the World Bank and two insurance companies since 2009. And while it remains to be seen whether someone with virtually no banking experience can turn around one of the world’s biggest banks, the need for a leader with Mr. Thiam’s skills and knowledge “speaks volumes about the state of global banking today,” Ms. Anderson writes. “More and more, regulation is pushing banking to be more like insurance: cautious and focused on costs and the allocation of capital.”

In interviews on Tuesday, Mr. Thiam played down his lack of experiencein investment banking. “If you talk about investment banking, Prudential has an $800 billion balance sheet, and we deal with exactly the same issues, whether it’s interest rates or markets,” he was quoted as saying on Bloomberg Television. “There is a lot of overlap.” Still, his lack of ties to the investment bank could mean he will be able to make cuts that Mr. Dougan may have been reluctant to make, Ms. Anderson writes. The change at Credit Suisse will be effective in June.

But this lack of Asian experience shows that the directors think that the main priorities for the bank are to shore up capital (rights issue coming) and mending ties with US regulators. He has great credentials for these tasks. Temasek seems to agree. it welcomed Mr. Winters, who “brings with him considerable experience, as well as an excellent reputation for building good teams.”

(*Btw, “inspired choice” is FT’s description)

Still the lack of Asian experience could become a major issue because there is expected to be an exodus of experienced managers. He may find replacements but changes will be disruptive if not problematic.

STANDARD CHARTERED OVERHAULS LEADERSHIP The British bank Standard Chartered responded on Thursday to shareholders’ calls for change, announcing a sweeping management overhaul including the departure of its chief executive, its chairman, the head of Asian markets and several directors, Jenny Anderson and Chad Bray write in DealBook. In a move that surprised many, it named William T. Winters, the 53-year-old former head of JPMorgan Chase’s investment bank ‒ who was once seen as a candidate to succeed Jamie Dimon ‒ to take the helm.

Mr. Winters, who will join the bank on May 1 and become chief executive in June, will succeed Peter Sands, one of the longest-serving chief executives in British finance. He will receive a base salary of 1.15 million pounds, or about $1.8 million, as well as a pension and other benefits. As the bank’s leader, Mr. Winters will not have it easy. The bank has been hurt in recent years by regulatory fines and investigations and by its focus on emerging markets. It has slashed thousands of jobs, closed its stock trading and underwriting unit and is looking to cut $400 million in costs. Impairments for bad loans, including in the mining sector, have soared.

But Mr. Winters, an American, appears up to the task. In a call with reporters, John W. Peace, the chairman, said that Mr. Winters had “great respect among regulators, clients and the market” and a solid understanding of the global regulatory environment. Temasek Holdings, which owns almost 18 percent of Standard Chartered, declined to comment on whether it had pressed for management changes. But it said that it welcomed Mr. Winters, who “brings with him considerable experience, as well as an excellent reputation for building good teams.”

The British bank HSBC is facing battles on multiple fronts. Already forced to apologize for helping clients hide their income from tax authorities, the bank also had to explain on Monday why its chief executive, Stuart Gulliver, went to lengths for years to hide his bonus, at least from his co-workers, Jenny Anderson writes in DealBook. On top of all that, HSBC, which generates much of its income from Asia, reported abysmal results for 2014, saying that its profit fell 15 percent, to $13.7 billion, compared with $16.2 billion in 2013.

The Guardian newspaper reported late Sunday that Mr. Gulliver held at least 5 million pounds, or $7.7 million, in a Swiss account through a Panamanian company until 2003. Mr. Gulliver said on Monday that the account was legal and that he had paid all the required taxes, but his maneuvers nevertheless compound a problem for the bank’s reputation, which is still dealing with the fallout from efforts by its Swiss private banking arm to help wealthy clients evade taxes, Ms. Anderson writes.

Mark Gilbert of Bloomberg View writes: “The cascade of recent revelations suggests HSBC still hasn’t learned its lesson and is more of a social menace than a social good. Mr. Gulliver’s personal tax arrangements may not be illegal, but they are surely ill-advised and inappropriate.” Unless Douglas Flint, HSBC’s chairman, “pulls off an Oscar-worthy performance at Wednesday’s parliamentary hearing, HSBC will only have itself to blame if the authorities decide the bank is too big to regulate and respond by seeking its dismemberment.”

The u/m aricle in early Feb reminded me of something I read last yr about an SME bank in the UK

DBS Bank has launched a programme to provide financing to technology start-ups and expand capital-raising options for technopreneurs.

Tech start-ups can tap the new DBS venture debt programme for working capital, buying fixed assets and even project financing*.

Our SMEs (small and medium enterprises) are always KPKBing money not enough. Govt says got plenty of schemes. Why no use? SMEs reply that terms too stringent, and the people administering the schemes are clueless about their businesses. .

Well the UK, where SMEs too are cocal in complaining about funding, has the British Business Bank. It does things differently

BBB devolves responsibility for choosing its investments to private-sector expertise by allowing the Angel CoFund board, composed of independent bankers and investors, to make the investment decisions. “This is a financial strategy to complement the government’s industrial strategy”, says Mr Morgan. It also uses the expertise of peer-to-peer lenders like Funding Circle, to which it has given £40m. Mr Morgan says the bank can thereby avoid crowding out the private sector. Its investments are always in the equity of a business, but it never takes a majority share.

*To qualify, tech start-ups must be backed by DBS’s partner venture capitalists, who include Vertex Venture, Monk’s Hill Ventures and Golden Gate Ventures. They should have raised at least $1 million of Series A funding, been in operation for at least a year, been incorporated for at least two years and have demonstrated that their business model is commercially viable.

“Start-ups in Singapore primarily rely on venture capital to fund their operations,” DBS said in a statement on Thursday.

HSBC is traditionally Li’s go-to bank for financing deals with its dominant local presence and a dedicated team to cover Li’s companies earned US$136 million in fees.Goldman Sachs has emerged as Li’s favored bank, pulling in an estimated $220 million in fees from Li’s two main companies Hutchison Whampoa and Cheung Kong Holdings since 2000.

Do remember that HSBC’s fees are on top of the interest it gets on its loans to these cos.

HSBC sold him Wharf once upon a time (the ang moh MD of wharf was angry as he said he could have arranged a better price) and both never looked back.

Which reminds me of the man who laid the foundation that made HSBC a global bank. Lee Quo-wei, the former chairman of Hong Kong’s Hang Seng Bank Ltd died on 12th August 2013, age 95

After joining Hang Seng Bank in 1946, Mr Lee was among those who transformed Hang Seng into the second-largest Hong Kong-based lender from a money-changing shop founded 13 years earlier. He helped Hang Seng end a bank run in 1965 with a capital injection from Hongkong & Shanghai Banking Corp, now HSBC. Four years later he was part of the team that created the Hang Seng Index.

Mr Lee was appointed executive chairman of Hang Seng Bank in 1983, according to a statement from current chairman Raymond Ch’ien. He retired in 1998, becoming honorary chairman and later honorary senior adviser.

If Hongkong Bank did not buy Hang Seng (at a good price from Hongkong Bank’s perspective, Mr Lee used to say to HSBC’s ang moh executives), HSBC, would not have become so entrenched into the HK economy. Look at StanChart and taz the best HSBC would have become.

As a shareholder of HSBC, I thank him.

Btw, It may be hard to imagine but once upon a time Bangkok Bank, OCBC were the rising banks while StanChart and HSBC were seen as the relics (albeit still powerful and rich) of colonialism.

The CEOs of Llyods and HSBC UK are reported to be hot favourites according to Bloomberg http://www.bloomberg.com/news/articles/2015-01-28/lloyds-hsbc-executives-seen-as-favored-for-stanchart-ceo-role. Both are Portuguese. And the latter is gayhttp://www.theguardian.com/business/2015/jan/18/hsbcs-antonio-simoes-says-being-gay-was-key-to-career-success .

Wespac’s CEO is also in the frame.

Another report says that our very own Gupta (FT turned new citizen) is also a possible candidate.

Given that StanChart is big in M’sia, Hk, India and Indonesia, and wants to be big in China, I somehow don’t think appointing a gay is on the cards

FT’s Lombard thinks that “ex-StanChart guy Alex Thursby” will get the nod.

Alex Thursby, who went on to run ANZ’s Asian businesses and is now the CEO of National Bank of Abu Dhabi. In his current role, he is trying to drive a bank that will become multinational by following trade within the emerging world – what he calls the West-East corridor. But when asked if this looks a lot like a StanChart model, he says: “I think this has similarities with the Standard Chartered of old. The Stanchart model has changed over the years since I was there, and whether it’s changed for better or worse is for others to make a judgment on.”

Thursby’s words are carefully chosen but he’s clearly referring to StanChart’s ventures into financial markets businesses that it used to leave to the pure-play investment banks. And it is notable that the financial markets business is the one that is causing the problems in the bank today; the warning today says that division is the “main challenge” facing the bank and that everything else is in line with expectations. The head of that business, Lenny Feder, is to take a 12 month sabbatical for personal reasons, the bank says, and will not return to that role afterwards.

The financial markets business in StanChart parlance includes some things that others might consider mainstream, like foreign exchange, but it also houses equities and commodities, among other things. Peter Sands, speaking about the reduced performance, said today that the business was being hit by falling volumes in rates, squeezed margins, regulatory changes, and the fact that less business is done in a low-rate environment.

None of which would have had much impact on the Standard Chartered model of old. Which raises a further question: perhaps this most storied and reliable of institutions should get back to doing what it’s good at. It might be boring. But it works.

“They rigged the money market, they rigged the mortgage market, they rigged the precious metals market, they rigged the foreign exchange market. Only a couple more markets to go and we’re in danger someone might have to ask if these banks are fit for purpose,” FT reader.

“Industries tend to attract people who have personalities that fit the industry norm. For decades petroleum engineers were alcoholics; police officers were people who needed the imprimatur of authority over others; and bankers were basically con artists making their living through deceit.”—on “Lying, cheating bankers”, November 22nd 2014

So not surprising

FINANCE START-UPS COURTING AN ANTI-FINANCE CROWD: Profit is usually a top priority on Wall Street, but some of the latest ventures into finance by start-ups seem to be inspired more by Karl Marx than John Pierpont Morgan. A number of new financial start-ups are trying to reach younger and middle-class Americans by upending the customary fee structure of traditional brokerage firms and money managers. They are backed by deep-pocketed venture capital investors – and even celebrities like the rapper Snoop Dogg – who are wagering that these upstarts can challenge the Wall Street establishment.

Aspiration, a start-up wealth manager in Los Angeles, which had its official debut last month, is asking customers to pay whatever they think is “fair.” That can be as much as 2 percent of their assets, or as low as zero. Reflecting its high-minded goals, the company has also pledged to donate 10 percent of its revenue to charity. Robinhood, a new brokerage firm based in Palo Alto, Calif., whose founders were inspired by the Occupy Wall Street movement, introduced an app this month that lets customers trade stocks without paying commissions. But for all their slick technology and fresh ideas, start-ups like Aspiration and Robinhood face considerable challenges, not least of which is figuring out how to turn a profit.

TEST FOR POST-CRISIS BANKING SYSTEM The market turmoil this week will test Washington’s efforts over the last five years to bolster the financial system, Peter Eavis reports in DealBook. Investors are stampeding out of risky markets, dumping junk bonds issued by American energy companies that have borrowed heavily to exploit the shale oil boom. A steep slide in the price of oil could now cause some of the companies to default, analysts say. But the most dangerous pain is occurring abroad, particularly in Russia, which is dealing with a currency crisis.

“Such difficulties echo the crisis that buffeted markets in the developing world in 1998, when Russia actually defaulted on debt denominated in rubles,” Mr. Eavis writes. Back then, contagion made its way onto Wall Street through an enormous hedge fund called Long-Term Capital Management that nearly collapsed after making bets way beyond its means. “The parallels with 1998 have led investors and regulators to ask if any similarly dangerous weak points exist today. And if they do, the question is whether the big banks are sturdy enough to bear the shocks,” Mr. Eavis writes.

For the moment, many specialists say the system is sufficiently girded. For one, the big banks today rely less on borrowed money to finance their trading and lending. And the Wall Street banks are not lending as much money to hedge funds and other investors to make highly speculative bets. Still, the big banks continue to rely on billions of dollars in short-term loans that could dry up in a panic. And some investors are concerned about geopolitical risks undermining economic confidence. The plunging oil price, for instance, could create even harder economic times for countries like Russia and Iran. But low oil prices might also constrain governments that have stoked instability.

BOND INVESTORS SKITTISH OVER EMERGING MARKETS The biggest energy companies in some of the biggest emerging markets ‒ Petrobras in Brazil, Pemex in Mexico,Gazprom in Russia ‒ sold billions of dollars of bonds to investors eager to capitalize on the high interest rates. But as the price of oil tumbles and local currencies plunge in value, those bonds are looking shaky, Landon Thomas Jr. writes in DealBook. Concerns are now mounting that their troubles will unleash a new wave of market contagion as big funds unload their stocks, bonds and other investments in these countries, Mr. Thomas writes.

The steep slide in the Russian ruble ‒ and the collapse of the country’s bond and stock markets ‒ has already rattled investors, driving a sell-off in Mexico and Brazil. Like Russia, these countries also relied on cheap money to bankroll their energy investments and fund their growth. Economists have also warned of broader economic ripples if big, state-run companies like Petrobras and Gazprom are cut off from the bond market and lack alternative financing options. The bond yields of all three companies, which move in the opposite direction of their underlying price, have surged in recent days.

The debt issued by Petrobras, Pemex and Gazprom can be found in the portfolios of bond investors worldwide, including BlackRock, Pimco and Franklin Templeton. Now investors are realizing just how risky these bonds are. Pimco’s Emerging Market Corporate Bond Fund, for instance, has seen its performance sag and investors withdraw their cash. The fund’s assets now stand at $496 million, compared with $1.5 billion in late 2013, suggesting it can’t weather too much more.

Double confirm that StanChart is a rogue bank and the PAP apologist is a fool because now: The management of Standard Chartered is facing renewed pressure after being placed under fresh scrutiny by US regulators.

The second biggest shareholder in Standard Chartered (after Temasek with around 27%) is standing by the embattled Asia-focused bank, continuing to buy the stock and insisting that nothing is “fundamentally wrong” with the company.

Martin Gilbert, chief executive of Aberdeen Asset Management PLC, said that funds run by his company have been “buyers of the stock in a fairly modest way,” despite a series of profit warnings that have sent Standard Chartered’s share price down 33% this year.

“We do not think there is anything fundamentally wrong with the bank,” said Mr. Gilbert, during a call to discuss Aberdeen’s results. He said that revenue growth had slowed but added that he would prefer the bank’s existing management team, headed by chief executive Peter Sands, to “sort it out” rather than looking for a replacement: “They have to really get on with it, I would say, and have a look at the costs.”

Aberdeen owns 7% of the bank, according to Factset, and, as of Oct. 31 2014, that had not changed since last year. Some Aberdeen funds have “topped up” their positions this month however, according to an Aberdeen spokesman.

The value of Standard Chartered shares held by the emerging markets-focused fund manager slid from a peak of $5.1 billion in February last year to $2.6 billion in October, according to Factset data. Part of that was due to an 8% reduction in the size of Aberdeen’s stake at the end of last year, but most was due to the bank’s falling share price.

It has some big exposures to heavily indebted clients, such as India’s Ruia brothers, who control the Essar Group, and Indonesian billionaire Samin Tan.

Honest mistakes.

—-

But the facts won’t stop Philip Ang, TOC’s and TRE’s star analyst, from cursing and ranting: he’s so bad that in a piece on a GIC, London investment, he left out the rental yields out of his calculation because he said that the income was “peanuts” (my word, not his). Well commercial property yields are a gd 6%, and have been as high as 8% in some yrs recently.

Top bosses at Standard Chartered admitted the bank’s performance had been disappointing as they announced plans to close 100 branches in a $400m (£250m) cost-cutting drive to win back support from disgruntled investors.

The admission was made as the bank’s top management team began three days of presentations to investors, who have endured a 30% drop in share values. There are also concerns about whether the bank has enough capital.

At the start of the three-day presentation, the new finance director, Andy Halford, said: “We recognise our recent performance has been disappointing and are determined to get back on to a trajectory of sustainable, profitable growth, delivering returns above our cost of capital.”

Standard Chartered Plc (STAN) fell for a fourth consecutive day in London after U.S. prosecutors reopened investigations to determine whether the bank, which entered into a deferred prosecution agreement in 2012, withheld evidence of Iran sanctions violations.

The U.S. Justice Department, Manhattan District Attorney Cyrus Vance Jr. and Benjamin Lawsky, superintendent of New York’s Department of Financial Services, are all reopening their original inquiries into the London-based lender to determine whether it intentionally withheld information from regulators before the 2012 settlements, according to two people briefed on the matter, who asked not to be identified because the probes are confidential.

Jack Ma, Alibaba’s founder, is a hero. He slew eBay in China. Now he is going up against new giants by shaking up China’s state-dominated finance industry. His business, the Zhejiang Ant Small and Micro Financial Services Group, processes payments, sells insurance and runs one of the world’s largest money market funds, placing it in competition with banks controlled by the Chinese government. It is a precarious position.

One problem after another. Can’t do anything right. Please American regulators, upset an Arab one.

Standard Chartered Could Face U.A.E. Legal Action Standard Chartered’s unit in the United Arab Emirates may face legal challenges after the British bank agreed to close some accounts as part of a deal with New York State’s banking regulator. Standard Chartered agreed on Tuesday to pay a $300 million fine for running afoul of a 2012 settlement to resolve accusations that the bank processed transactions for Iran and other countries blacklisted by the United States.

Star British fund manager Neil Woodford sold his fund’s stake in HSBC (HSBA.L) last month, citing concerns about the impact of potential fines from several industry-wide investigations on the banking group.

Banks in Europe and the United States have been fined for a variety of transgressions as regulators increase their scrutiny of financial institutions

“I am worried that the ongoing investigation into the historic manipulation of Libor and foreign exchange markets could expose HSBC to significant financial penalties,” Woodford said in a blog posting on his fund’s website.

“Not only are these potentially serious offences in the eyes of the regulator, but HSBC is very able to pay a substantial fine,”

…

For Woodford, who began building a stake in the UK’s biggest lender in 2013 after avoiding the sector since 2002, HSBC was “a different beast” to its peers, many of which still had problems over the quality of their loan books, capital adequacy and high leverage ratios.

In spite of the fact he considered HSBC a “conservatively-managed, well-capitalised business with a good spread of international assets”, Woodford said he had become concerned in recent weeks about the threat of “fine inflation”.

From the $1.9 billion paid by HSBC in 2012 over money laundering to the $16.7 billion set to be paid by Bank of America over its role in selling toxic mortgages, fines were increasing, Woodford said, and looked to be based on a company’s ability to pay “rather than the scale of the transgression”.

With the size of any potential fine “unquantifiable”, Woodford said he was concerned about HSBC’s dividend payouts. The stock currently yields 4.8 percent, against a FTSE100 average of 3.8 percent.

“A substantial fine could hamper HSBC’s ability to grow its dividend, in my view. I have therefore sold the fund’s position in HSBC, reinvesting the proceeds into parts of the portfolio in which I have greater conviction,” he said. Reuters

For the record, HSBC is trading at 1.1x book, its European peers are at 0.9, while StanChart is at 1.03. Our banks are at 1.3.

Standard Chartered has said first-half operating profits will be 20% lower than a year earlier, blaming a slump in income from its financial markets business.

The warning comes only three months after the Asia-focused lender reported its first fall in annual profits for a decade.

The UK bank had been expected to show a modest bounce-back this year.

But it said tougher regulations and low market volatility had hurt revenues.

…

Standard Chartered said its interest rate and foreign exchange trading had been particularly hit.

Chirantan Barua, an analyst at Bernsteinm said: “Cyclical headwinds are yet to arrive in full force in the bank’s two key markets – Hong Kong and Singapore. Not that Korea or India is out of the woods either.

“Pack that in with a challenging and uncertain capital regime that won’t be resolved until the end of the year and you have a great deal of uncertainty around the stock.”

StanChart shows the peril of investing in a stock listed overseas overseas that operates internationally. When profits were gd, sterling was weak against all major currencies. When sterling is strong, profits no gd. Note the value of sterling is irrelevant to the underlying profits or losses of most of bank’s international operations.

——

ON AN afternoon in early summer a prospective customer walked into the gleaming new branch established in Shanghai’s free-trade zone by DBS, a Singaporean bank that, like many of its international rivals, has long touted China’s great promise for its business. The lobby was empty, save for a guard playing a video game. A log showed that the branch was attracting just two or three visitors a day. DBS remains optimistic about China and says that most of its free-trade-zone transactions are routed through other locations. But the torpid atmosphere at the branch points to foreign banks’ struggle to crack open the Chinese market.

—–

To be fair to DBS its New Citizen CEO is not like the FT CEO of OCBC who may have blundered.

OCBC is offering to buy Wing Hang Bank’s shares for 125 Hong Kong dollars (US$16.12) each, in a big bet on China’s sustained economic growth. OCBC hopes the deal will springboard its growth into mainland China through the Hong Kong bank’s cross-border operations, and give it a foothold in Macau.

OCBC and Wing Hang Bank, one of Hong Kong’s last remaining family-owned lenders, began discussions on a possible deal late last year, and in January entered exclusive talks (after ANZ and UOB balked at the family’s asking price), which were extended twice as they argued over price.

The most recent comparable transaction (and bargaining benchmark for the family), the 2013 sale of Chong Hing Bank, went for 2.35 times book value including the value of a special dividend related to Chong Hing’s real estate. Accounting for the increase Wing Hang ascribes to the value of its property, the OCBC offer is closer to 2 times book value, a discount, compared to the Chong Hing deal, considering Wing Hang’s return on equity averaged 11.3% for the past three years, versus 7.8% for Chong Hing, according to Capital IQ.

Still OCBC shareholders were not that happy and its share price suffered.

What is unknown is the value of Wing Hang’s Hong Kong real estate, on some of the busiest shopping streets in the world. These could be worth even more than the bank says. A government index of Hong Kong retail properties has risen 400% over the past decade. Yet the company’s revaluation over the acquisition cost of the property is less than 100%.

If enough of Wing Hang’s minority shareholders refuse the price on offer, however, OCBC might prefer to raise it or offer* or bear the cost of maintaining the Wing Hang listing, and the cost of failing to fully integrate the bank.

Update at 6’00am: Here’s someone who thinks OCBC got sold a dog.

Wing Hang gives it greater opportunity to finance trade between China and other parts of Asia such as Malaysia and Indonesia, where it already has a foothold. Wing Hang’s strong funding base – loans were just 73 percent of deposits at the end of last year – is another advantage, as is its ability to capitalise on the yuan’s growing international popularity. About 17 percent of Wing Hang’s deposits are currently in the Chinese currency.

Nevertheless, the purchase brings risks to OCBC investors. China’s economic slowdown is creating credit wobbles, while Hong Kong’s property boom is bound to have led to some lending excesses. Meanwhile, rising interest rates in the United States could reverse the cheap deposits that have flowed into both Hong Kong and Singapore in recent years. Shareholders, who will probably be asked to help finance the purchase, may pay a high short-term price for OCBC’s long-term China ambition.

DBS Bank yesterday said that it will buy the Asian private banking business of Societe Generale for US$220 million, accelerating its ambition of becoming a leading wealth manager in Asia.

The deal will also widen the gap with DBS’s closest rival, the Bank of Singapore, a unit of OCBC Bank.

The price represents about 1.75 per cent of assets under management (AUM), based on the AUM of Societe Generale Private Banking Asia (SGPB Asia) of US$12.6 billion as at last Dec 31. This is a steal: OCBC in 2oio paid US$1.46bn which represents 5.8% of the unit’s assets under management, after adjusting for surplus capital of US$550m*.

Last Tuesday’s BT went on: DBS’s AUM will go up by about 23 per cent to S$85 billion from the current S$69 billion with the purchase, seven months after it was reported the French lender wanted to divest the business to redeploy capital into its core markets.

Swiss bank UBS is the largest private bank in Asia-Pacific, followed by Citi Private Bank and Credit Suisse, in that order according to trade journal Private Banker International in a 2012 survey.

That survey ranked DBS and Bank of Singapore ninth and 10th, respectively.

DBS is onto a winner with this FT and his FT COO. Well DBS deserves it, given the FTs it has had where “T” stands for Trash. SGX needs that kind of luck where both its CEO and COO are FTs where “T” certainly doesn’t stand for Talent. They did Temasek no favours by saying everything was kosher about the share price movements of Olam (More on this next week).

Coming back to OCBC. Its CEO is a Hongkie FT with great credentials. But he hasn’t shown whether the “T” is for Talent or Trash. So far the mkt inclines to the latter. OCBC’s share price crashed (and have yet to recover) when OCBC annced purchase of Hong Kong’s Wing Hang Bank few months ago. Deal is still pending. Hopefully, it dies a natural death.

My fav bank is still UOB where the chairman and CEO are true blue S’poreans. But UOB has limited visions which suits my taste here. DBS is for those who want to own a bank can be the leading regional bank in place of CIMB. It always had the vision but the FTs leading it let it down. Gupta has the talent (and luck) to make it the leading regional bank despite DBS not having significant presences in Indonesia and M’sia. It’s expansion plans in Indonesia were thwarted. S’pore has to play ball with Indonesia (allowing Indonesian banks more privileges here) for DBS to be able to buy Temasek’s Bank Danamon stake.

Finally, yesterday’s BT had a story about the difficulties our three banks were facing. UOB’s finance director said “Funding pressures will serve as a growth constraint for mid-sized banks like us outside of Singapore, particularly amid a backdrop of tightened liquidity conditions in the region. UOB has always emphasised funding stability. We must also be selective in the customer segment we engage in and avoid large concentration risks.” Taz straight talk.

So is [C]ompetition in US-dollar funding is likely to intensify, given the anticipated growth in trade financing, and the liquidity requirements of Basel III, says OCBC’s Mr Tan. Trade financing is still mostly greenback-denominated.

DBS’s Ms Chng says: “The so-called ‘balkani-sation’ of the financial landscape is an emerging risk, potentially resulting in captive capital and liquidity pools within each jurisdiction and impacting the pursuit of synergies across regional operations.”

But sadly they couldn’t resist sprouting PR rubbish

“From a capital perspective,” says Darren Tan, chief financial officer of OCBC Bank, which is negotiating to buy Hong Kong’s Wing Hang Bank, “we prefer to acquire majority stakes where possible. However, in instances where a majority stake is not immediately available, we will still give the opportunity due consideration if there is strategic value in the acquisition.”

United Overseas Bank’s approach to overseas growth is to expand the platform for customers to tap trade flows within the region, says its CFO, Lee Wai Fai.

*My 2010 analysis: But maybe OCBC shld have waited. The purchase of ING’s Asian private banking business could come to haunt OCBC. A few days before this deal was annced, ING sold its European biz, at a fraction of the multiple that it got for Asia. Only time will tell if the growth in Asian wealth and OCBC’s ability to grow the private banking biz will justify the hefty premium that OCBC paid.

It paid US$1.46bn which represents 5.8% of the unit’s assets under management, after adjusting for surplus capital of US$550m. This compares with the 2.3% measure paid by Julius Baer for ING’s Swiss assets which is in line with another European purchase by an American private equity group of a smallish private banking outfit — RHJI’s purchase of Kleinworth Benson from Commerzbank.

Trumpets pls. BTW, I don’t blame the previous FT CEO of OCBC, Richard O’Connor. He was retiring. In such circumstances, usually the CEO would not take the lead in such a move: he’d go with the flow. Rightly, as he wouldn’t be the person running the show.. This is what happened here, I’m reliably informed. BTW too, he did a great job. Ngiam Tong Dow (remember him) called him an honorary S’porean, I think.

Lower economic growth prospects and tighter credit conditions could create a tougher operating environment for the banking sector here and in the region, said a report by Standard & Poor’s (S&P) late last week.

S&P expects S’pore’s GDP) growth to fall to 3.4 % this year, from 3.7% last year.

UOB has been the star performer this week, gaining 3.5 per cent, while OCBC has risen 2.3 per cent and DBS 0.4 per cent.

UOB, despite being the smallest of the trio, has been particularly impressive with its fee income and regional strategies, CMC Markets Analyst Desmond Chua told TODAY.

“In terms of fee income, it has performed relatively well while the market has been lacklustre, in part due to a higher interest outlook. Its diversification to grow in regional emerging markets has also helped it maintain loan growth despite weaker mortgage demand in Singapore,” he said.

“On the other hand, OCBC’s share price might have been affected by the prospect of its overpriced acquisition of Wing Hang Bank in Hong Kong while DBS hasn’t been able to impress with its fee-based revenue in recent times despite aggressively attacking this space,” he added.

UOB’s net interest margin, which is the highest among local banks at 1.72 per cent full-year, is another advantage for the lender, Voyage Research’s Deputy Research Head Ng Kian Teck added. “UOB has historically been good on this front, and it means the bank can churn the most value out of every dollar loaned — that’s what’s attracting the investors,” he said.

All three banks ended last year on a positive note, with their fourth-quarter net profit rising between 6 and 11 per cent on the back of strong growth in net interest income.

The banks have also continued to solidify their regional presence, drawing more revenue from overseas than before.

….

“Their return on equity is healthier vis-a-vis the other industries, which are facing greater margin pressure due to higher wages. But the banks have been able to control this issue better.”

CMC Markets’ Mr Chua is also bullish, saying: “I’m looking at the banking space being an outperformer this year even though interest rates are bound to rise. Their tactical diversification across this region allows them to tap into Indonesia’s emerging affluent segment, for example.

*DBS Bank chief executive Piyush Gupta expects home prices to fall by 10-15 per cent this year – more than the 10 per cent forecast by property consultants – but says that this decline would not make a material impact on the bank’s loan book. Speaking at DBS’s Q4 results briefing, he said it is likely that the prices of high-end homes will slide 15 per cent, and that for lower-end ones, by 10 per cent.

As for the higher interest rates expected with the shrinking of monetary stimulus policy by the US, he said he was not expecting it to have any effect on DBS. “The Singapore portfolio is really driven on income considerations . . . As I’ve said before, the pressure will likely start coming when unemployment rises – more than when property prices change.” Singapore’s unemployment rate is now at a low 1.8 per cent.

Mr Gupta said: “All our stress tests in the past have shown that we can easily withstand a 20 per cent reduction in Singapore property prices without material impact on our portfolio. We stress-test (for a) 20 (per cent fall in property prices), but don’t expect it to happen; our stress tests are always calibrated to go off the charts. My own sense is that there will be a correction of 10-15 per cent.”

He noted that the market was already stabilising and that the froth was running off, but that if this continued, the government would roll back some of the macro prudential measures. Sales of new mortgages have plunged 30-35 per cent at DBS, and by 40-50 per cent at OCBC Bank as a result of the stricter loan rules.

Mr Gupta likened the Singapore property market to that of New York and London, where prices held up even during the financial crisis between 2008 and 2012. While prices in the rest of the US fell by about a third, prices in New York slipped by only 10 per cent. It was a similar situation in London, another city where the demand is not dependent on the state of the domestic economy.

Mr Gupta said he expects regional money buying properties here to also put a floor under prices. With the slower sales, DBS’s $49.1 billion mortgage book is likely to grow by $2 billion to $2.5 billion this year, down from $3.5 billion last year and $5 billion the year before that, said Mr Gupta.

OCBC Bank chief operating officer Ching Wei Hong said of the new mortgage sales having declined across the board: “That’s expected, given all the cooling measures that have been imposed. We’ve built up a healthy inventory level. The inventory drives the growth of (the loan) book, going into 2014 and 2015. Beyond 2015 H2 and 2016, if conditions remain the same, we’ll see a bit of tapering in that period.”

(Update on 23 January 2014: TOC has confirmed that his present employer is Crossinvest*: Mr Casey’s firm Crossinvest Asia is investigating his comments and is set to take “appropriate action” once the review is completed, British newspaper, The Independent reported.

In a statement, Managing director Christophe Audergon said: “Crossinvest does not condone the comments. We believe they were made in poor taste.”

I’m very certain, he will be moving on from Crossinvest given that: The Company was created out of a Swiss single family office with almost three decades of leading experience and presence in Switzerland. We operate based on the finest Swiss Private banking traditions.

Well among the finest Swiss Private banking traditions are

— discretion; and.

— operating in the shadows, leaving no fingerprints behind.

Don’t see Casey meeting these standards.

As to my thinking he worked at HSBC, it was an honest mistake.)

Dear Sirs,

I am a long-time shareholder (since 1984) and a client (since 1981), and am someone who has had friends working there: locals and international officers, and am writing this letter more in sorrow than anger.

I hope HSBC does the right thing by S’poreans especially its local customers, and moves on the FT (where T stands for Trash not Talent) by the name of Anton Casey out of the bank. His so-called attempt at humour does not reflect well on the bank because he is holding a senior position in wealth management.

One would be reasonable in wondering of the quality and discretion of HSBC’s management when such a senior executive exercises such an appalling lack of judgement and sensitivity. Especially since HSBC prides itself on being the “global local bank”.

His behaviour also insults the international officers. I knew and worked with a few of them in the early 1980s on various projects. They were all minor public school boys who would never ever stoop to such insulting behaviour which they would have rightly called ‘hooliganish” and “racist”.

RHB Bank will aggressively expand its Singapore business by three-fold within the next two years, by focusing on the small and medium enterprise business, wealth management as well as corporate and investment banking.

To meet the increased business needs, RHB Bank Singapore will be doubling its staff strength from the current 500 to 1000, the bank said Thursday.

The aggressive expansion in Singapore is part of the group’s regional strategy, said to U Chen Hock, director of group international business at RHB Banking Grou… the official opening of RHB’s latest branch in Westgate Mall in East Jurong. . (Last week’s BT)

Maybe RHB’s mgt doesn’t read a certain Forbes contributor (no not refering to one LKY), or TRE readers’ comments on S’pore’s prospects or that more than 90% of the Marina Bay Suites are unoccupied: only 20 of the 221 units at the 66-storey tower are occupied. . But I do know that the RHB research institute has a well respected economist.

Standard Chartered had a bad start to the hols. Last Monday, its shares fell sharply on the possibility that it might call for a rights issue in the wake of weakish results. They’ve since recovered but there was another sharp fall on Fridaty, albeit from a much recovered position.

It has also been forced to strip its finance boss of his responsibilities to oversee the lender’s risk division following pressure from the Bank of England.

Richard Meddings, who has been group finance director of Standard Chartered since November 2006, had to hand over governance responsibility of risk to Peter Sands after the Prudential Regulation Authority said it was concerned with Meddings holding two conflicting roles, according to news reports.

In particular, the PRA, the Bank of England’s financial watchdog, was concerned with the potential conflict between Meddings’ finance responsibility and his duty to oversee risk operations.

All this against the background that it is no longer an ang moh favourite because emerging markets are no longer in fashion. Their economies are slowing while the Western economies are recovering. And the wall of money is returning to the West.

BTW, those readers of TRE who bitch that Temasek lost money on StanChart and say that I didn’t know this fact are daft: all they needed to do is to google up StanChart’s 10 yr price. But if anyone wants to see the numbers: here’s why.

Well since late June, Chinese bank shares have been on a roll, example ICBC (where Temasek had been picking up shares this yr) is up more than 22%. Recent Chinese economic data has got investors buying the banks again, ang mohs included. So much so that some smaller Chinese banks are planning IPOs in HK.

Anyway,Jack, the usual suspects, and the readers of TRE, TOC and TRS needn’t yet bang their [ ] in frustration. Firstly, Temasek can never ever exit these investments given that S’pore wants to be China’s friend. Temasek got big chunks of BoC and CCB at a “special” price.. It can only play around the margins, reducing its cost of these investments.

Then are there two more reasons why we should be worried about Temasek’s punt:-

Alibaba, the e-commerce group that just bought a 51 percent stake in asset manager Tianhong for $193 million, is the banks’ main foe. By July it had made over $16 billion in short-term loans to companies who sell goods on its sites. Its real-time records of borrowers’ cashflows and counterparties aid lending decisions.

Banks’ deposits are also under threat. WeChat, the mobile chat app that clocked up over 300 million users within two years of being launched by gaming group Tencent, is working on distributing wealth products via smartphones, and offering payment for fund managers, according to Chinese media. Alibaba lets users reinvest surplus balances in their online payment accounts into money market funds. That gives savers a better return than the 3 percent capped rate they get on bank deposits.

Tech companies’ desire to disrupt the financial services sector is understandable. China’s big banks make returns on equity in excess of 20 percent.

Add to that, an attempt to shake up the country’s slow-moving financial industry and create more investment opportunities for the private sector, Chinese regulators have invited companies from across the spectrum to apply for banking licences.

— With bad loans and competition rising, China’s largest banks face tougher times ahead. ChinaScope Financial, a research firm partly owned by Moody’s, a ratings agency, has analysed how declining net interest margins will affect China’s banks. It estimates that the sector will need an injection of $50 billion-100 billion over the next two years just to keep its capital ratios at today’s level. The managements of the Big Four realise this, and have won approval from their boards to raise over $40 billion in fresh capital over the next two years. But Andrew Sheng of the Fung Global Institute, a think-tank, reckons the sector will need to raise even more later: up to $300 billion over the next five years.

— China’s bad debts could blow a $500 billion hole in bank balance sheets. That’s roughly how much extra equity the eleven biggest lenders might need if 10 percent of their loans went sour, according to a Breakingviews calculator.

Yesterday, I opined that Yaacob and Mah disprove the PAP Hard Truth reasoning that ministers must get paid very well. Well here’s evidence that high pay doesn’t result in gd returns for investors because bank executives get paid plenty of money but investors don’t benefit.

[I]f there might be a justification for high bank salaries, it is that they have delivered high rewards for investors, and that is clearly not the case. This seems to be a classic case of an inside job – of executives benefiting at the expense of shareholders.

What is … striking is the contrast with the performance of bank shares (see chart), with that of the salaries of bank executives. The inflection point in bank salaries goes back to the early 1980s and we could only get data for the chart back to 1994. But I suspect the longer-term trend would be the same as the 1980s was marked by the third world debt crisis that damaged so many bank balance sheets. As a humourist once wrote of British films

ICBC pays 6.1%, while CCB and BoC pay 6%. If it had AgBank, it would get 6.4%.

Contrast this with the dividend yield it gets from

— DBS: 4.4% (UOB’s yield is 2.9% and OCBC’s is 3.2%)

— Bank Danamon: 2.4%

— StanChart: 3.5% (BTW, earlier this month the bank said that it was no longer targeting double digit revenue growth this year. Year-on-year revenue growth in the first six months was less than 5% for the first time in 10 yrs.)

And there are gd reasons to be fearful. One is concern that there could be more bad debts building up in the system as the economy slows/

Another: ChinaScope Financial, a research firm, has analysed how increased competition and declining net interest margins will affect banks operating in China. The boffins conclude that the smallest local outfits, known as city commercial banks, and the middling private-sector banks will be hit hardest, but that returns on equity at the big five state banks will also be squeezed (see chart). They think the industry will need $50 billion-100 billion in extra capital over the next two years to keep its capital ratios stable.

The bigger worry for China’s state banks is the signal sent by the PBOC’s move. The central bank has affirmed its commitment to reform. If those reforms include the liberalisation of deposit rates, then something far more serious than a minor profit squeeze will befall China’s banks. Guaranteed profitability would end; banks would have to compete for customers; and risk management would suddenly matter. In short, Chinese bankers would have to start working for a living.

And two of China’s four “bad’ banks (they bot portfolios of dud loans from Chinese banks, the last time the Chinese cleaned up their banks in the late 1990s and early noughtie), are planning to raise capital via IPOs. They have impressive returns. But maybe China is preparing for the day it has to recapitalise the banks again. In such a case, the UK and US experience is that the other shareholders get diluted, and can lose serious money. Think UBS and RBS.

Even if there is no recapitalisation, there are likely to be rights issues, something that ang moh fund mgrs don’t like.

But to be fair, this big chart shows a possible reason why Temask is optimistic. Despite loan growth, bad loans are falling. But the economy was growing rapidly. And sceptics point out that the numbers may be flakey. In the 1990s, the real bad loan position was 20%, not the lowish figures reported at the time. Investors forget this ’cause banks were 100% govt owned.

One advantage S’pore has is tax. Deloitte ranks Switzerland only in fifth place for tax competitiveness, behind Bahrain, Singapore, Hong Kong and the United Arab Emirates. S’pore also has an advantage in attracting Asian wealth, like not being part or near of China, while being in Asia.

But I think the PM is right (even though he cannot even get the haze issue right: he talked of the haze coming back “for weeks” about a month ago, but since then the reading was “moderate”, now “good”),

Two reasons

— Private banks in the Asian financial hub, Singapore, are the next target of tighter regulations after the crackdown in the U.S. and Europe on tax cheats. From July 1, any banks believed to be abetting tax evasion or having inadequate controls in place may face a heavy fine, criminal charges and possibly the loss of their license to operate in the city state.http://www.cnbc.com/id/100793751

— The G8 countries are getting more aggressive in making sure that places like Switzerland and S’pore cannot hide behind secrecy laws to avoid sharing info. In short, all offshore havens will have to be more transparent, and none will have an advantage over the others. Money moved from Switzerland to S’pore in the noughties because it was tot S’pore would not be forced to be more open; not true anymore.

The only adv that S’pore has over Switzerland, is that Asia is getting richer, esp China, and Asean; the latter with a population of over 620m, would be “the 21st century’s champion in fostering the vast middle class consumer market”, according to the Japanese PM. Asean is in our immediate neighbourhood, a great advantage. And S’pore has been a traditional regional financial, commercial and services centre.

Interestingly, not reported here, Deloitte says Hong Kong could overtake Switzerland as the world’s top wealth manager as early as 2019 if current asset growth rates are maintained. Being part of China has its advantages esp in attracting non-Chinese money that wants a piece of the action in China. And HK’s reputation for financial innovation doesn’t hinder.

Temasek has accumulated more than [US]$17 billion of holdings in Beijing-based ICBC, China Construction Bank Corp. (939) and Bank of China Ltd. over the past two years, according to data compiled by Bloomberg. Global firms including Goldman Sachs and Bank of America Corp. have divested holdings as new capital rules known as Basel III make it more expensive to hold minority stakes in banks. (Bloomberg few days ago)

S’poreans have to keep a beady eye on developments in the Chinese economy particularly in the financial sector.

Well things don’t look that rosy:

There is of course a second and much more disturbing possible implication of spiking lending rates in China – which is that the slowdown in credit creation will lead to tumbling asset prices, widespread bankruptcies and the crippling of the banking and wider financial system …

According to a recent and influential report by Fitch, outstanding loans by Chinese banks and shadow financial institutions were equivalent to 200% of GDP at the end of 2012, up from around 125% of GDP in 2008.

As quantum, domestic business and household debt at two times GDP is high – pretty similar, for example, to a debt burden on the UK private sector which has hobbled our [UK] economy.

But it is the stunning and unsustainably rapid rate of growth in Chinese credit creation, and who has borrowed the money, that are the main sources of concern.

Unless China is re-writing financial history, much of that money will have been lent without due care to businesses and individuals, and many of them will never be able to repay much of it.

Well in the case of the UK, two major banks were effectively nationalised, and the existing shareholders were left with “peanuts”. And UBS and Citi received injections of cash from their central banks in exchange for securities, exchanges that diluted their other shareholders, including GIC.

In 2007/2008, our SWFs’ bot into UBS (GIC), Citi (GIC) and Merrill Lynch (Temasek) in a big way that ST characterised then as showing S’pore was a tua kee investor.

Hopefully Superwoman Lina Chiam will raise the issue of Temasek’s strategy doubling up on Chinese banks in parly so that the finance minister’s rebuttal of her concern, will be a matter of public record, come the next GE.

South East Asia is expected to drive growth in the luxury market in Asia this year. Analysts at Bain and Co predict that luxury goods sales will grow by 20% in 2013: Greater China only 6% http://www.bbc.co.uk/news/business-22564297

Great graphics: explains how the opening up of Burma will allow ships to by-pass the Malacca Straits.

DBS’ woes

DBS Group Holdings is hoping it will have to settle for the minority stake (40%) it has been offered in Indonesia’s Bank Danamon. It hopes that talks between the central banks of Indonesia and Singapore will clear the way for a majority takeover. Pending these, it may ask for an extension from seller Temasek Holdings.

Note that because UOB and OCBC have a bigger regional presence (thks to legacy branches in M’sia), they trade at a 25% to DBS in terms of book value.

Carson Block, the short-seller who runs Muddy Waters LLC, said he’s betting against the debt of Standard Chartered Plc (STAN) (STAN) because of “deteriorating” loan quality, triggering a 13.5 percent jump in the cost of insuring against losses on the debt of the British lender.

Somehow I don’t expect StanChart to go berserk like Olam, “Carson Block is outside of the bank and does not have access to the bank’s loan files,” said Jim Antos, a Hong Kong-based analyst at Mizuho Securities Asia Ltd. “He has very little ammunition in his gun to shoot at Standard Chartered at this point. He’s got one example of a large loan that appears to be something that possibly would not have been prudent to book.”

Finally DBS has a FT CEO where the “T” stands for “Talent” not “Trash”. He had a bad start when its consumer banking IT systems failed at the beginning of tenure, for which he can’t be blamed. An earlier FT CEO where the “T” stood for “Trash” outsourced its IT systems, only for the process to be reversed by another FT(rash).

(Gupta, who oversaw a 29% jump in DBS shares last year, was awarded a S$3.5 million cash bonus and company stock valued at S$4.6 million as part of total compensation, according to the annual report. His base salary totalled S$1.2 million.)

In the early noughties, OCBC was the bank that never failed to screw-up. It had an FT (Still has one as CEO). Fortunately his replacement was a Talent (can’t call him Foreign, as he has been in and out of S’pore for decades). DBS became the “go to” bank for mess-ups. Now Gupta has got DBS into a “stable” state: gd for him and Temasek must be grateful.

And UOB’s true blue hereditary banker got a 30% pay rise last yr. Well those of us who hold UOB shares (indirectly in my case via Haw Par) can’t complain. UOB has avoided the “Trash” risk by keeping things local. And avoided problems.

Coming back to OCBC, pls send yr COO to PR class. OCBC’s COO said its differentiation strategy has been to re-orientate the consumer finance business from being product-centric to one centred on the customer. BT’s headline rightly screamed “OCBC shifts strategy to focus on the customer”, but this sadly sells OCBC short: it never was into product pushing like DBS where FD customers were targeted for HN5 Notes and were then left to swing in the wind, when Hongkies were compensated for similar notes.

As my mum still has her OCBC fixed deposits, I’m grateful. If she had been a DBS customer, she’d have been targeted by Team HN5, and lost her money.

The map shows HSBC’s biz in terms of loans made as of 2010. S’pore is up there with China, Brazil, Oz and UAE. After the UK, Greater China (HK, China and S’pore) comes second. The bank is running down its US loan portfolio with continuing sales and write-downs.

And New rules will force mainstream lenders to cap their exposure to some of the riskier off-balance sheet products they have sold to customers – in particular, those that are effectively repackaged corporate debt. That limits a big source of risk for banks, but creates a new one for the Chinese economy.

The junk bond market in China took off this year. Although the deals still account for a small share of the global total, Chinese companies have sold $8 billion of high-yield bonds to overseas investors since January. That’s up from $2.3 billion during the same period a year earlier, according to figures from Dealogic … the Chinese market has its own set of potential problems, and some analysts worry that investors aren’t being properly compensated for the added layer of risks.

he bulk of the high-yield bonds in Asia this year — roughly half — come from Chinese real estate companies. The fear is that the housing market, which has been booming, is a bubble that will eventually burst.

Mainland China’s domestic bond market remains largely off limits to foreign buyers. So most investors buy offshore Chinese bonds, which are issued through holding companies headquartered in places like the Cayman Islands.

The bonds tend not to be backed by the actual businesses and underlying assets in mainland China. That means foreign bondholders may have little legal recourse if a company defaults on its debt, especially if local banks or other Chinese creditors make claims.

Bondholders are now facing such difficulties with the bankruptcy of Suntech Power.

Derivatives that pool credit- default swaps to make magnified bets on corporate debt, popularized in the last credit bubble, are making a comeback as investors search farther afield for alternatives to bonds at record-low yields.

Citigroup Inc. (C) is among banks that have sold as much as $1 billion of synthetic collateralized debt obligations this year, following $2 billion in all of 2012, according to estimates from the New York-based lender. Trading in so-called tranches of indexes that use a similar strategy to juice yields rose 61 percent in the past month.

“Cyprus is not just an island in the sun. We have developed a unique service sector which was based on confidence in the banking system,” George Vassiliou, a former prime minister, told the Guardian recently.

CIMB has a very gd CEO who made the bank a regional player bigger than DBS by managing to pick-up a controlling stake in an Indon bank during the 2007 financial crisis at a song (usually foreigners get screwed in Indonesia), and the rest is history. Everyone else is now playing catch-up including MayBank.

Sadly, if BN does not win a two-thirds majority in the coming general elections, he will out on the street. As the election result is expected to be close, CIMB executives are assuming whoever wins, he will go. He is the younger brudder of the PM, and if BN does not win a two-thirds majority, he will be defenestrated, and younger brudder will follow.

But it’s always like that in M’sia. The CEOs, and controlling shareholder (unless it is a govt agency) are always vulnerable when there is a change of PM, or when there is an unsuccessful attempt to replace a PM.

Both were narco banks. They were founded in the 19th century to finance the trade in opium between British India and Manchu China. They moved on with HSBC becoming one of the biggest banks in the world while StanChart remained like HSBC, once was, a an emerging markets bank. But HSBC returned to its roots: HSBC was fined for providing help to the Mexican drug cartels (bank counters were made bigger to facilitate the handing over of bank notes). StanChart was fined for a technical offence.

A bid by Malaysian low-cost carrier, AirAsia, to set up an airline in India has won approval from the Indian government.

It would be the first foreign company to try to capture the rising demand in India’s aviation sector.

AirAsia India would be a joint venture with the well-known Tata Group, based in Chennai in South India.

India’s aviation industry, which has suffered major losses, was opened to foreign investment last year.

The government now allows foreign companies to own up to 49% of a local airline.

AirAsia, which is Asia’s largest low-cost carrier, will make an initial investment of 800m rupees ($15m; £10m) and will own 49% of the new airline, while Tata Sons will have a 30% stake. Part of BBC report

Citigroup Makes Preparations for Profit-Sharing Plans Executives of Citigroup “stand to collect $579 million under profit-sharing plans that include the one shareholders voted against last year. The lender booked a $246 million expense in 2012 tied to the plans, adding to $285 million for the previous year and $48 million in 2010, according to regulatory filings,” Bloomberg News reports.

Charles Peabody, an analyst with Portales Partners LLC in New York, said the payouts are difficult to justify given last year’s shareholder rejection. Peabody, who told clients in a 2011 note that he was “dismayed” by the lack of stringent financial thresholds in that year’s plan, said today that Citigroup hasn’t done enough to tie pay to performance.

“The compensation plan was a travesty,” said Peabody, who has an underperform rating on the shares. “Citi’s board and management team continue to make a mockery of shareholder, political and regulatory demands that compensation reflect performance.” …The profit-sharing payouts are on top of annual salaries and bonuses granted to senior executives …

… Citigroup’s use of pretax profit to grant awards “sets the bar too low,” said Hodgson, the compensation analyst. “They’re not looking at anything else apart from pretax income, which is just not a good enough measure of a bank’s performance.”

Standard Chartered posted a slight increase in annual net profit in 2012. Its businesses in emerging economies offset a US$667 million fine in the United States connected to illegal money transfers.net income rose less than 1, to US$4.8 billion, compared with 2011, while revenue rose 8%, to US$19.1 billion. It was the 10th consecutive year that Standard Chartered had reported a yearly increase in its profit. Its vast operations across Asia, Africa and the Middle East helped protect the bank from many of the problems affecting developed economies like the United States and Europe … Standard Chartered has continued to expand in emerging markets by taking advantage of growing demand for financial services from both local companies and international entities looking to invest.

The bank said its operating income in China grew 21 percent last year, to $1 billion, as it benefited from expanding its local branch network sixfold since 2003. Standard Charted said it was now active in 25 emerging economies where its annual growth was in double digits.

Indonesian lenders the most profitable among the 20 biggest economies in the world, according to data compiled by Bloomberg. The average return on equity, a measure of how well shareholder money is reinvested, is 23 percent for the country’s five banks with a market value more than $5 billion … Returns in Indonesia, Southeast Asia’s largest economy, are driven by net interest margins, the difference between what banks charge for loans — an average of 12 percent, according to the central bank — and what they pay for deposits. The average margin for the country’s big banks is 7 percentage points, the highest of the 20 economies … Indonesia’s high net interest margins have prompted banks such as DBS Group Holdings Ltd. in Singapore, where the figure averages 2 percent, to look at acquisitions. DBS, Southeast Asia’s biggest lender, made a $6.8 billion bid in April for 99 percent of Bank Danamon and is awaiting regulatory clearance.

In Vietnam, the government’s planned sale of a 20% in Sabeco, a brewery, is expected this year, according to bankers.

Wilmar, one of Asia’s largest agribusinesses, and Cargill, the commodities’ trader are setting up in Burma.

18 companies, including Malaysia’s Axiata, Norway’s Telenor Group, parent of the Thai mobile operator DTAC, Digicel, the Caribbean based operator, and two Singaporean companies, Singapore Telecommunications, one of southeast Asia’s biggest telephone companies, and ST Telemedia, a unit of Temasek Holdings, have submitted proposals for the two telecoms licences

The Burma has abolished a 25-year-old ban on public gatherings of more than five people: more liberal than S’pore.

Malayan Banking Bhd (Maybank) has made a US$100 million capital injection into its Philippines operations.The banking group, the fourth largest in the region, on the previous Friday launched a new corporate head office in Manila and announced plans to double its number of branches in that country to 100 by 2014, and thereafter to 200 by 2018, Malaysia’s Business Times said.

It currently has 54 branches there, with another expected to open in the city of Davao by the end of this month.

Maybank Philippines Inc (MPI), which has been operating since 1997 and is now the 24th largest bank by assets, may eventually go for a listing there. The Philippine central bank had last year issued a directive, requiring banks controlled by their foreign counterparts to go for a listing on the Philippine Stock Exchange.

And wonder if the SME financing target mentioned in this BT report from sometime in the middle of 2012, was met. As not heard any more, I suspect not.

UP to $175 million of the $250 million the government has earmarked for investment in small- and medium-sized enterprises under the first phase of its public-private co-investment funding programme for local SMEs will be seeded with private equity funds by year-end.

The programme includes a fund-of-funds called the SME Catalyst Fund, which the $175 million investment falls under, and a direct co-investment fund called the SME Co-Investment Fund.

This means that some $350 million will be placed with the PE funds by the end of this year for investment in SMEs, as the private sector has to match dollar-for-dollar what the government is putting with the PE funds.

The $350 million is part of the first phase of the co-investment fund that is expected to come up to $500 million – $250 million from the government, and the other half from private sector capital.

As to whether the White paper on population reflects a U-turn on the policy of starving SMEs of cheap FTs, only time will tell. Watch and wait. Remember the WP was bitching in parly about the shortage of labour among SMEs. Chinese-owned SMEs fund the WP.

— Mitsubishi UFJ (MUFJ), Japan’s biggest bank, bought a 20% stake worth US$743m in state-owned VietinBank, the largest-ever merger or acquisition deal in Vietnam’s banking sector. The deal aims to boost “support for Japanese companies operating in Vietnam”, Bank of Tokyo-Mitsubishi UFJ president Nobuyuki Hirano said, and to tap South-east Asian markets; after seeing its profits tumble this year, like other Jappo banks.

The Japanese bank last month reported profit in the six months to September dived 58 per cent year on year to US$3.6 billion, due partly to declines in stock holdings.

VietinBank, or Vietnam Joint Stock Commercial Bank for Industry and Trade, said State Bank of Vietnam will still own the majority of its shares. For the record, it is Vietnam’s second largest bank by asseys.

— SMFG said it plans to expand its consumer finance business to target the growing middle classes in South-east Asia.

Among the details to emerge in the US investigation of HSBC as the narco barons banker of choice were the larger-than-usual cashier windows in Mexican branches to get more notes through. Nice to see that the bank that I use and invest in is so customer-friendly.

And its continuing to try to improve investor returns:

— The selling selling of its entire 15.6% stake in Ping An Insurance, the big insurer based in Shenzhen, to Charoen Pokphand Group* means HSBC has sold more than 40 noncore assets since the beginning of 2011 and booked about $4 billion in gains on those sales this year alone, DealBook reports. HSBC expects to book an after-tax gain of US$2.6 bn on the Ping An sale (more than enough to pay the US$1.9bn US fine).

— In October, it announced that it will close its Islamic finance operations in six markets, maintaining its presence only in Saudi Arabia, Malaysia, and a scaled-down operation in Indonesia.

—

*controlled by the Thai billionaire Dhanin Chearavanont. The deal is to be financed partly by the state lender China Development Bank,

“Analysts at Barclays recently highlighted concern over StanChart’s bad debt trends, evident in a 42 per cent increase in loan impairments in the first half of the year, compared with pre-tax profit growth of only 9 per cent,” reports FT. The growth is fastest since 2002.

So as StanChart still trades at a 25% to HSBC (1.5x book value versus 1.2X), this may account for the stories that Temasek wants out of its stake.

FT’s banking editor suggested that it could be split five ways: “into an equity and fixed-income trading entity; an advisory platform; a US retail bank network; a global trade finance shop; and an emerging markets retail bank.” [This para added at 6.07am on day of publication.]

OCBC and CIMB have signed non-disclosure agreements as they consider bidding for General Electric’s stake in Bank of Ayudhya, Bloomberg News reports. MayBank is interested as usual, but doing nothing, as usual. I’m surprised that OCBC is interested.

Bank of Ayudhya is Thailand’s top or second-ranked provider of credit cards, car loans and personal finance, having bot businesses from HSBC, GE and AIG, among others.

The British bank where Temasek has a controlling stake of 19%, which agreed in August to pay the New York state’s top banking regulator US$340 million to settle money-laundering allegations (and in the process making a PAP apologist look even more stupid: he attacked the NY regulator as a “rogue prosecutor”), may be at risk of losing money on a US$1 billion loan to an Indonesian tycoon to buy shares in an Indon mining company*controlled by the family of an indon presidential candidate. He bought the shares at abt 11 sterling last yr. Now under 150 pence.

So when early in 2011, when it started pushing yuan deposits and other investments linked to the yuan to its customers, I tot “No, not again”. By early May 2011, it had sold more than 27 billion yuan (S$5.2 billion) of investments linked to the Chinese currency to wealthy investors here it boasted.

Well 2011 wasa not a gd year for the yuan, and 2012 has been a disaster.

While most economists expect the renminbi will stay flat or rise slightly over the next year, financial markets tell a different story.

In the non-deliverable forward market, where traders place bets on the future exchange rate, the yuan or renminbi is priced to fall 1.3 per cent against the dollar over the next 12 months.

Some experts say the decline will be much more substantial. Jim Walker, an economist who predicted the 1997 Asian financial crisis, forecasts a 5 per cent depreciation over the next year because “corporate financials in China are deteriorating dramatically. Extract from last week’s FT.

And we know S$ has been appreciating vis-a-vis the US$.

Interestingly OCBC, Singapore’s second-biggest bank, was not aggressively promoting offshore yuan deposits to Singapore customers due to the risk of near-term losses as the local currency is likely to appreciate at a faster pace.

“We’re pretty cautious with regard to offshore RMB business in terms of deposits. For a Singaporean, we think it is not very wise,” CEO David Conner said at an earnings briefing in May 2011.

“Our forecast has always been that the Singapore dollar will appreciate faster than the renminbi so we are not pushing that hard with our customers.”

OCBC’s comments came shortly after aforesaid boast by DBS. So it looks like although Rajan the FT Indian who blew up the “treasured’ clients moved on, the culture of screwing clients still remains?

(BTW, O’Connor is the kind of ang moh FT, we don’t get enough of. We get trashy FTs like SGX’s CEO (ang moh) and president (Indian Indian) who talk the talk of attracting IPOs but who underperform.)

The CEO of Asia Commercial Bank, Ly Xuan Hai, has been arrested on suspicion of committing economic crimes.

What this run shows is that:

— Doing biz in Vietnam can be dangerous if the authorities don’t like you.

— Banks like StanChart and HSBC do biz in some dangerous places and their high capital ratios and conservative loan to deposit ratio have a purpose. But really do all three S’pore banks need to be among the 10 safest banks in the world?

Chief Justice Chan Sek Keong said in a written judgment: “In the light of the many allegations made against many financial institutions for ‘mis-selling’ complex financial products to linguistically and financially illiterate and unwary customers during the financial crisis in 2008, it may be desirable for the courts to reconsider whether financial institutions should be accorded full immunity for such ‘misconduct’ by relying on non-reliance clauses which unsophisticated customers might have been induced or persuaded to sign without truly understanding their potential legal effect on any form of misconduct or negligence on the part of the relevant officers in relation to the investment recommended by them.”

Coutts recalls a story when a client dropped his wallet over the side of his yacht. One satellite-phone call later and the bank couriered out cards and cash to the next port he was going to. Then there was the diabetic client who got straight off an aircraft and into back-to-back meetings. When he finally checked into his hotel, there was nothing on the menu he could eat, so he called his bank – obviously – which duly sent a taxi there, complete with restaurant recommendations.

Private banks even send their clients’ children on boot camps for offspring of the ultra-rich. AH Loder Advisers has an annual dog sled expedition across the Arctic. While billed as leadership training, these trips are as much about ensuring the children stay with the bank when they inherit.

On 25 July, Mexican regulators have imposed a fine of US$27.5m on HSBC for its failure to comply with money-laundering regulations. The fine is the highest ever imposed by Mexican regulators. It constitutes 51.5% of the 2011 annual profit of HSBC’s Mexican subsidiary.

The week before, a United States Senate committee found that HSBC had provided a conduit for “drug kingpins and rogue nations”. HSBC’s head of compliance, David Bagley, resigned at the Senate committee hearing over allegations that the bank ignored warnings that Mexican drug money was being allowed to pass through the bank.

The US department of justice is conducting a criminal investigation into HSBC’s operations.

HSBS is expected to be fined heavily by the US.

So as a shareholder, I was upset that it didn’t use the defence that it was doing God’s work by laundering narco money. As the latest issue of the Economist writes: A gleaming chapel in Hidalgo state recently put up a bronze plaque thanking Heriberto Lazcano, head of the Zetas, for a donation. When the pope raised an eyebrow about such “narco alms”, a Mexican bishop, Ramón Godínez, replied that when Mary Magdalene washed Jesus’s feet with expensive perfume, he didn’t ask her how she paid for it. “There is no reason to burn money just because its origin is evil. You have to transform it. All money can be transformed, just as corrupted people can be transformed,” he said. With God as its money launderer, Mexico’s dirtiest industry should stay on a high.

If HSBC can surmount its current troubles, it has extraordinary opportunities. The year-long investigation was cited by the Senate as a test case. There is abundant evidence of other global banks having similar problems. Creating a compliance system that can satisfy regulation will not be cheap or simple. Companies in poor countries may find that their costs for routine transactions soar. But the rare banks that have the scale and the resources to operate in this environment will have a business niche to themselves. http://www.economist.com/blogs/schumpeter/2012/07/hsbc%E2%80%99s-grilling

As a shareholder with a barbed sense of humour, I can laugh all the way to the bank.

But if investment is another Merrill Lynch or Barclays or like GIC’s UBS nightmare, amount lost will be “peanuts”. Still.

Credit Suisse initiated a series of measures on July 18 to boost its capital position, including a 3.8 billion Swiss franc issue of mandatory convertible securities to new and existing investors.

The securities will pay an annual coupon of 4% until they convert into 234 million ordinary shares in March 2013. Half the issue will be taken up by strategic investors including Qatar Holding, Saudi Arabia’s Olayan Group, BlackRock Investment, Capital Research Global Investors, Norway’s Norges Bank and Temasek. Some of the strategic investors have also underwritten the other half of the issue, which will be offered to existing Credit Suisse shareholders.

As a shareholder of HSBC and shumeone with a barbed sense of humour, don’t know whether to cry, or laugh and commend HSBC.

The present CEO is trying to get HSBC back to its Asian (i.e Chinese) roots, out of adventures in the US and Latin America. Funny thing is that in these places it was returning to its roots.

HSBC was used by “drug kingpins”, says the US Senate, something the bank agreed with. It will be fined heavily. But in the 19th century it was banker to Jardine Matheson and the other British and Indian drug lords who were selling opium into China.

Great ad slogan, “Trust us. The Mexican and Columbian drug cartens trusted us”. Or “Banker of choice to the drag barons of East & West throughout the ages”.

As you will know, OCBC and its Great Eastern Holdings insurance unit said they had been approached with an offer to buy their combined 18.2% stake in F&N as well as their 7.9% cent holding in Asia Pacific Breweries.

FT reports that the bidder is “a unit of ThaiBev”. It is Thailand’s largest and one of the largest beverage alcohol companies in South East Asia. Listed on SGX. Interestingly it has distilleries or breweries in Scotland, Poland, Ireland and France, in addition to Thailand and China. Makes Chang Beer.

Will never hear of this in our MSM, only why the Swiss bankers are rushing to Asia (and S’pore).

Geneva, which became a refuge in the 1960s for Egyptian cotton merchants fleeing President Gamal Abdel Nasser, developed as a Middle East banking center after King Fahd constructed a palace in the lakeside suburb of Collonge-Bellerive, where he held councils on summer evenings

15 major banks* (including another GIC investment UBS) were hit with credit downgrades on Thursday that could do more damage to their profitability, credit worthiness and further unsettle equity markets.

The credit agency, Moody’s Investors Service, which warned banks in February that a downgrade was possible, cut the credit scores of banks to new lows to reflect new risks that the industry has encountered since the financial crisis.

Citigroup was among the hardest hit. After the downgrades, the bank stands barely above the minimum for an investment grade rating, a sign of the difficult business conditions it faces.

Banks have struggled to improve their profits against the backdrop of the European sovereign debt crisis, a weak American economy and new regulations. The downgrades may amplify their problems. With lower ratings, creditors could charge the banks more on their loans. Big clients may also move their business to less-risky companies, further affecting earnings.

Wonder if LKY, who made the 30-yr comment, has repented making the comment?

Update

Citi bitches: Citi said in a statement that Moody’s approach “fails to recognize Citi’s transformation over the past several years,” adding that “Citi strongly disagrees with Moody’s analysis of the banking industry and firmly believes its downgrade of Citi is arbitrary and completely unwarranted.”

When SVB Financial Group’s banking unit Silicon Valley Bank opens a branch or office or j/v here, we will know that S’pore has made it into the Silicon Valley ecosystem. It has juz opened its first int’l branch: in London. It will target Britain’s technology, life science, private equity and venture capital sectors

Silicon Valley Bank counts Cisco Systems, Mozilla and Pinterest, among its US clients.

Silicon Valley Bank also has offices in Israel, India and is expected to open a joint venture bank in China with Shanghai Pundong Development Bank.

When it comes to town, bang balls KennethJ, TJS, TRE, TOC, E-Jay, SDP etc. But don’t worry guys, it’ll be a long time, if ever, before the PAP government’s rhetoric becomes a reality*. In tomorrow’s post, I’ll link to stories which show how competitive Vietnam is becoming in software development to places like India, and that even Cambodia, with an American’s help, can use the internet get into a global biz competing with China and India.

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*I mean juz see the BS around the comment made on LSD use, and on sex between adults juz because they are not married. So intolerant.

Gd news for our three local banks. They can expand their US$ lending activities (US$ is preferred currency of borrowers).

Expect them to raise more perps. They will be exploring the possibility of selling US$ perps to our local retailer investors to avoid having to swap the proceeds into US$. But retail investors don’t like foreign currency issues: juz look at Hutch Ports.

BDO Unibank Inc., the Philippines largest lender on Tuesday priced the country’s largest share sale (US$1bn 1-for-3 rights offering at a 24.9% discount to its 15-day VWAP to give a total deal size of Ps43.5bn,US$1bn), to give the bank funds to compete for infrastructure lending. Details.

Teresita Sy-Coson, vice chairwoman of SM Investments Corp., said “Infrastructure is not our area of expertise, but we intend to join the government’s initiatives by providing funding for those who will take up those projects.” She is the daughteer of the controlling shareholder.

.The bank aims to reduce its dependence on consumer loans by tapping credit demand from the nation’s biggest companies, including Ayala Corp. (AC) and San Miguel Corp. (SMC), as they bid for $16 billion in infrastructure projects unveiled in 2010 by President Benigno Aquino. The fund infusion will also bolster Manila-based BDO’s risk buffers and spur overseas expansion, Sy-Coson said.

Maybe if DBS can’t get its deal on Bank Danamon through or on acceptable terms, it should look North.

DBS has a 21.4% stake in BPI via its 40% stake in Ayala DBS where Ayala has the majority 60% stake. UOB seems to have a 2% stake in BDO Unibank. OCBC doesn’t seem to have a presence in the Philippines. All three local banks have subsidiaries in Indonesia.

Temasek is Filipino-lite. It doesn’t own anything direct in the Philippines: no banks, no telcos.

Its largest exposure is via Singtel which has a major investments in the Philippines (via Globe 47% which it controls together with Ayala 32%. Global is the second largest telco in the Philippines.

Keppel has some exposure via a shipyard but its not big.

If Temasek wants to go big in the Philippines, then DBS could be used.

By planning to allow financial institutions a maximum of 40% in an Indon bank (applicable only to new investors), the Indon central bank has blocked Temasek’s plan to sell its 67% stake in Bank Danamon to DBS Bank where it has a controlling stake.

On a day when banks (and other blue chips) are weak in local trading (UOB -1.5% and OCBC -0.5%) fact that DBS is only -o.6% shows that investors are not upset over the failure of the deal.

One reason is that institutional investors don’t like big “strategic” deals by their investments because they usually overpay and are prone to destroy shareholder value. Here while the price is decent, the issue of lots of new shares to Temasek is dilutive to earnings.

Ah well back to the drawing board DBS mgt to find a new driver for growth. Same too for Temasek’s financial enginners. The deal would have reduced Temasek’s direct exposure to Indonesia while increasing its exposure to DBS.

While reading this , I saw Calvin Yeo’s reply to a question on why corporates were issuing perps

… one reason is to diversify the sources of funding. Another reason is that the market cannot withdraw the financing facility like the bank can in a credit crunch. Investors also have generally less bargaining power than the banks, so it is harder for them to take action against the issuer or place restrictive covenants. As you see, the terms of the bond are drawn up by the issuer rather than the lender. For most loans, banks tend to be the ones giving the terms of the loan.

Another main reason is that banks don’t normally issue perpetual loans, you would have to issue perpetual bonds or preferred stocks for that.

On the issue of diversification, most European banks have been cutting back their lending outside their home markets because they are shrinking their balance sheets to meet the new capital rules. No-one wants to invest in them (on terms acceptable to the banks) because of the Euro crisis.

In Asia, the French banks (like Soc Gen, BNP and Credit Agricole) were once very big USD lenders, the currency of choice, to corporates. They have now withdrawn*. So corporates that used them, now have to find other lenders. Seems to have found a new source ofsuckers in the retail mkt here.

Asian banks (including our DBS, OCBC and UOB) are increasing their USD lending to these corporates as the European withdrawal have improved USD lending margins (the Frogs were very, very aggressive) .

Let’s hope DBS doesn’t get too aggressive in USD lending. Not concerned by OCBC’s and UOB’s increased lending (I own Haw Par shares as partly as a play into UOB). They have conservative controlling shareholders and mgt (I’m assuming the newish CEO of OCBC is as conservative as O’Connor**). Can’t say the same abt the cowboys at DBS and Temasek, though DBS’s chairman and CEO have reputations as conservative bank executives. The Bank Danamon deal shows otherwise in my view.

**Anyway someone in OCBC is a tough taskmaster. O’Connor earlier this yr said that working in OCBC for 10 yrs felt like 40 yrs. No wonder Tony Tan and Yong Pang How (remember him?) preferred to be cabinet minister and chief justice respectively. And remember O’Connor was from Citibank, not known for its relaxed style.

OCBC Bank was recently named as the world’s strongest bank for the second straight year by Bloomberg Markets Magazine. (The ranking featured 78 global banks with at least US$100 billion in total assets.They were assessed based on factors such as their Tier 1 capital ratio, loan-to-deposit ratio, ratio of non-performing assets to total assets and their efficiency ratio, which compares costs with revenues.)

OCBC said the bank’s strength is partly built on its “disciplined credit management practices and robust risk management capabilities”.

If I were the controlling shareholder of OCBC, I’d be very upset at this ranking because what it means is that OCBC is not making its assets work: it has too much capital. I’d tell the board that the most impt KPI should be that OCBC drops out of the top 10 on the list.

It can be done. UOB was at seventh place, down from sixth last year, while DBS fell three spots to eighth this year.

UOB and DBS are doing the right thing. Their core market (like that of OCBC) is S’pore and it’s a safe, boring, stable market where margins are only so-so. So not much capital is needed, if one sticks to the basics of banking, and not try to be a hedgie.

As to the right amount of capital, look at StanChart at no.12. It operates in a wide range of emerging markets, some in unstable parts of the world like West Africa and so needs to have capital lying around. If S’porean banks have abt the same level of capital, they should still be safe.

Last month, Temasek bought US$2.3bn worth of shares in Industrial and Commercial Bank of China (ICBC), taking its overall stake in the bank to 1.3%. I commented that it was increasing its bet on the big Chinese banks (it owned big stakes in three of them) when the mood on them was getting bearish.

Well it is now sell US$2.4bn worth of its shares in Bank of China and China Construction Bank.

So overall, it is reducing its stakes in BoC and CCB (locking in some profits: it got into these at very attractive prices as a cornerstone pre-IPO investor) while adding a stake in ICBC to the mix at a slight discount to the market.

Regular readers will know that Temasek’s investments in Bank of China and China Construction Bank are great investments. It came in as a pre-IPO cornerstone investor and unlike the Western banks that had similar status had not sold out. Gd friend of China. It trades out and in of these stocks to make realised profits. But these trading profits are peanuts as the trading positions are peanuts in relation to its holdings in these banks

And that it recently bot Goldman Sach’s remaining stake in ICBC, at a slight discount to its mkt price.

As this article explains these banks have an unending appetite for capital because they are “squeezed for capital”. So Temasek has to be willing to cough up more of our money if it wants to avoid being diluted when rights issues are called.

An Australian who recently retired as head of Standard Chartered’s business in China believes there’s a strong chance of a major Chinese lender picking up a cornerstone stake in one of Oz’s big four banks within a few years. The Age carried an interview with Mike Pratt, , who says it’s “highly possible” that a major Chinese player will take a stake of up to 15% in a major Australian bank this decade”.

ANZ Bank would make the most sense, given its super-regional bank strategy. Commonwealth Bank is increasing its presence in Asia but is nowhere as regional as ANZ Bank.

Westpac (a portmanteau of “Western-Pacific”) despite its name, and National Australia Bank both focus on Oz after misadventures abroad.

Temasek has agreed to buy Goldman Sachs’s shares in the Industrial and Commercial Bank of China (ICBC), the world’s largest bank. It will buy US$2.3bn worth of ICBC shares, taking its stake to 1.3% in the bank.

In an interview with Reuters at the end of March, Ho Ching’s presumed successor-in-training, Temasek’s head of portfolio management,acknowledged the heavy allocation to financials, but noted that it holds four very good banks: Bank of China, China Construction Bank, DBS Group and Standard Chartered. Well it has added ICBC to this list, and at a price close to the market price, unlike the stakes in the other two Chinese banks where it got a “special” price as a pre-IPO cornerstone investor.

But is it a wise move?

True, since the lows last October of the Chinese and HK stock markets, the shares of the four leading Chinese banks (including Bank of China, China Construction Bank and ICBC) have gone up by more than half, easily outperforming the broader market.

But since March, prices have been off (but masked by general market falls) because of concerns abt China’s growth, bad loans and comments by the Chinese PM, Wen Jiabao, who hinted of breaking the monopoly state-owned lenders have enjoyed in China’s banking sector. (The sector is dominated by four big state-owned banks and Temasek now has significant stakes in three of them.)

Mr Wen said that their monopoly was hurting businesses in the country, as they had few options to raise capital.

“Frankly, our banks make profits far too easily. Why? Because a small number of major banks occupy a monopoly position, meaning one can only go to them for loans and capital,” he was quoted as saying by China National Radio. “That’s why right now, as we’re dealing with the issue of getting private capital into the finance sector, essentially, that means we have to break up their monopoly.”

The lack of easy availability of capital has often been cited as threat to growth of small and medium-sized businesses in China. There have been fears that some of these businesses, seen as key to China’s growth, may turn to unofficial sectors for capital, increasing their borrowing costs substantially

But Temasek could be betting on, “Wen has one year left [in his term].” This was said by an unnamed Chinese state banker quoted by Reuters. “This is a task for the next generation of leaders. It cannot be accomplished within one year.”

But the banker could be wrong, Wen could be telling us what has been agreed upon between his generation and the next generation of leaders.

Remember, It took a beating on its finance industry holdings after the 2008 crisis, losing about $5 billion in stakes held in Barclays and Merrill Lynch, now part of Bank of America. It has since trimmed its financial holdings by 4 percentage points to 36 percent of the portfolio. Last month, it sold a 1.4 percent stake in India’s No.2 lender ICICI Bank. From said Reuters reported.

And of the remaining two “very good banks” where Temasek has significant stakes, DBS has juz decided to buy Temasek’s stake in Bank Danamon. Management will now be preoccupied with getting the deal approved by the Indonesian authorities, then integrating the bank into DBS. Before this deal, management had finally got to grips with DBS’s operational problems. The danger is that the focus on the Danamon deal may lead to backsliding in the area of operatons.

The genuine jewel is StanChart, but by global standards, it is “peanuts”.

So investors sold DBS on news of its Bank Danamon purchase. It closed 0.39 lower (2.75%) to 13.79. About a quarter of the sellers seemed to have bot UOB which closed up o.36 (1.97%) to 18.64.

As to OCBC, it closed down 0.03 (o.33%) to 8.96. Unlike DBS and UOB, a large chunk of its profits comes from life insurance. Hence, it was of no interest to those who wanted out of DBS but wanted exposure to S’pore banks. And there is the uncertainity of what the new CEO will want to do. The retiring CEO did a good job: he stuck to the basics of banking and life insurance.

Despite all the propoganda from our constructive, nation-building mainstream media, aided and abetted by the wires and most brokers, investors don’t like the Bank Danamon deal. To be fair, investors nowadays don’t like their investee companies doing mega strategic deals (like Pru’s attempted purchase of AIA last year) because the historical numbers (still disputed) seem to show that strategic deals destroy shareholder value.

Well the non-Temasek shareholders of DBS will have an opportunity to reject the deal, if they think that Temasek benefits far more than DBS? BTW, did you know that when DBS bot PosBank from Temasek all that many years ago, it was a great deal for Temasek, not so gd for DBS .